Audit results of government departments show a shocking decline

21st November 2018

By: Kim Cloete

Creamer Media Correspondent

     

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The Auditor-General has been given more powers to crack down on national and provincial government department and their entities. This follows another year of overall decline in their audit results, with a rise in wasteful and irregular expenditure and weak financial controls.

Releasing his general report for 2017/2018, Auditor-General, Kimi Makwetu, said audit outcomes had regressed at the level of both departments as well as public entities.

He told a media briefing at Parliament that while audit results of 43 auditees had improved, these were overshadowed by the 73 that had regressed from the previous year. 

Makwetu painted a dismal picture of the audit outcomes of government departments and entities. He said the results also reflected a worrying pattern, with departments and entities regressing rather than improving over the past four years.

He attributed this largely to those charged with governance being slow to implement, or totally disregarding audit recommendations made by his office.

At national level, clean audits decreased to 23% of the total audited population compared to 30% in the previous financial year. The Western Cape produced the best results, reporting 83% of clean audits. Gauteng followed with 52%. Northwest and the Free State were the weakest.

Fruitless and wasteful expenditure across departments and entities increased by over 200% to R2.5-billion for 2017/2018 compared to the previous financial year.

Unauthorised expenditure rose by 38% from the previous year to R2.1-billion, 86% of which was a result of overspending.

The non-compliance with supply chain management legislation increased.

“The status was even worse then 2014/15, in spite of all the reporting we have done in this area, the red flags we have raised and the many recommendations we have made. Uncompetitive and unfair procurement processes and inadequate contract management were common.”

Makwetu said there was a litany of department flouting supply chain regulations.

Irregular expenditure continued to remain high at R51-billion.  “The rise paints a picture of departments that are unable to operate within their budgets, resulting in deficits and overdrafts,” said Makwetu. The R51-billion excludes State Owned Entities that are not audited by the AGSA, where total irregular expenditure totalled R28.4-billion.

Several provinces were in a very bad way. Northwest posed a significant financial health risk. “The more the system of internal controls gets ignored, the more the financial risk mounts up,” Makwetu told the briefing.

Delays in the completion of projects, poor quality work and payments without evidence of delivery, especially in the Free State, has resulted in poor service delivery and allegations of fraud.

There was an emerging risk of increased litigation and claims against departments. Almost a third of the departments had claims against them in excess of 10% of their next year’s budget.

“Departments do not budget for such claims, which means that all successful claims will be paid from funds earmarked for the delivery of services, further eroding the ability of these departments to be financially sustainable,” warned Makwetu.

The financial health of government departments and state entities continued to deteriorate, with departments in particular battling to balance their finances.

The report indicated that the financial health of departments regressed further in 2017-18, ‘continuing on a downward spiral’ since 2014-15.

The Auditor General said the Public Audit Act had been finally amended, which would provide the office with more power to ensure accountability in the management of public funds.  Officials will be held personally accountable.

“We are trying to influence the culture. In the past people were used to a situation where they think they have R120 million of irregular expenditure and nothing will happen to them. We will find you this year doing exactly the same stuff. We didn’t have the power to do anything about it. Now we will say: ‘We give you the opportunity to correct it.  If you don't diligently stop the bleeding of the financial resources, a certificate of debt will trigger’.”

The Auditor General said there had been an increase in departments and entities contesting audit results, leading to the delay of some results. He said it was acceptable for auditees to question and challenge the outcome of audits based on evidence and solid accounting interpretations or legal grounds. However, he said pressure was often placed on his office’s audit teams to change conclusions ‘purely to avoid negative audit outcomes or the disclosure of irregular expenditure – without sufficient grounds’.

During the briefing, he said state auditors would sometimes arrive back in the parking lot after working on audits to find their car tyres slashed. 

Edited by Creamer Media Reporter

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